Whereever the ghost of Fischer Black is

he is not haunting Lloyd Blankfein, who has had to learn risk lessons the hard way. I choose my top 3 from his list of 7:

The first is that risk management should not be entirely predicated on historical data.

Second, too many financial institutions and investors simply outsourced their risk management. Rather than undertake their own analysis, they relied on the rating agencies to do the essential work of risk analysis for them.

Fourth, many risk models incorrectly assumed that positions could be fully hedged. After the collapse Long-Term Capital Management and the crisis in emerging markets in 1998, new products such as various basket indices and credit default swaps were created to help offset a number of risks. However, we did not, as an industry, consider carefully enough the possibility that liquidity would dry up, making it difficult to apply effective hedges.

Note that the government enabled risk outsourcing with chartering the rating agencies. So much for the government protecting investors and taxpayers.